SB Financial Group(SBFG) - 2024 Q4 - Annual Report

Company Operations - SB Financial Group, Inc. operates through its subsidiaries, including State Bank, which has 25 banking centers and 7 loan production offices as of December 31, 2024[16]. - At December 31, 2024, State Bank had 244 full-time equivalent employees, while SBFG Title had 8 full-time equivalent employees[16][17]. - The company dissolved four inactive subsidiaries in December 2024, indicating a strategic move to streamline operations[22]. - The Company employed approximately 252 full-time equivalent employees as of December 31, 2024, and management considers its relationship with its employees to be good[97]. - The Company has a low annualized voluntary turnover rate, attributed to its strong values-based culture and commitment to career development[96]. Financial Performance - State Bank had $24.7 million of excess earnings over the preceding three years as of December 31, 2024, which may influence future dividend declarations[37]. - Net income for the year ended December 31, 2024, was$ 11.47 million, a decrease from $12.10 million in 2023[210]. - The cash dividend declared per common share increased to$ 0.56 in 2024 from $0.52 in 2023[210]. - The Company paid quarterly dividends of$ 0.56 per share in 2024, up from $0.52 per share in 2023, indicating a 7.69% increase[192]. - For the twelve months ended December 31, 2024, the Company generated$ 17.0 million in noninterest income, accounting for 29.9% of total operating revenue, compared to $17.7 million or 31.1% in 2023[201]. Regulatory Compliance - The company is subject to the Bank Holding Company Act and must maintain a minimum common equity tier 1 capital ratio of 4.5% as per Basel III Capital Rules[45]. - The Federal Reserve Board requires all depository institutions to maintain reserves at specified levels, with the reserve requirement ratio at 0% as of December 31, 2024[34]. - The company must obtain prior approval from the Federal Reserve Board for significant acquisitions or mergers, ensuring regulatory compliance[28]. - The Company is subject to the jurisdiction of the SEC and NASDAQ regulations, ensuring compliance with corporate governance and reporting requirements[67][68]. - The Company continues to qualify under the Small Bank Holding Company Policy Statement for exemption from the FRB's consolidated risk-based capital and leverage rules at the holding company level[57]. Market and Competition - The company faces significant competition in attracting depositors and borrowers, primarily from other commercial banks and financial technology companies[23][24]. - Recent bank failures, including Silicon Valley Bank and Signature Bank, have created panic and uncertainty in the investor community, potentially affecting customer confidence and liquidity sources[127]. - The company faces strong competition in attracting deposits and originating loans, which may require adjustments to interest rates that could adversely affect net interest margins[144]. Risk Management - The Company is exposed to operational risks, including cybersecurity risks and potential disruptions in communications and information systems[123]. - Cybersecurity threats remain a significant concern, with potential breaches leading to reputational damage, loss of customer business, and increased regulatory scrutiny[138]. - The reliance on third-party service providers poses risks related to cybersecurity and operational disruptions, which could adversely affect the company's operations[140]. - The Company has not detected significant data loss or material financial losses related to cybersecurity attacks, but acknowledges ongoing threats[89]. - The Company’s risk management program includes regular assessments conducted by third-party experts and internal audits[178]. Economic Conditions - The company’s success depends significantly on local and national economic conditions, particularly in Northwest and Central Ohio, where a significant portion of lending relates to real estate[104]. - The company’s financial condition may be adversely impacted by increased delinquencies and credit losses if real estate markets or the economy deteriorate[115]. - The company may experience significant credit losses if actual credit losses exceed the ACL, which could adversely affect operating results[111]. Capital and Assets - As of December 31, 2024, State Bank was in compliance with all regulatory capital requirements and met the standards for the highest capital category, a "well-capitalized" bank[55][56]. - Total assets increased by$ 121.7 million, or 9.7%, over the last five years, with loans growing by $174.0 million or 19.9% and deposits by$ 103.6 million or 9.9%[207]. - The Company reported total deposits of $1,152,605 thousand as of December 31, 2024[182]. - As of December 31, 2024, total nonperforming assets were$ 5.5 million, or 0.40% of total assets, up from $3.3 million or 0.25% in 2023[206]. Strategic Initiatives - The company completed the acquisition of Marblehead Bancorp, Inc. and its banking subsidiary, The Marblehead Bank, on January 17, 2025[121]. - The Company established a presence in Ottawa County with the acquisition of The Marblehead Bank on January 17, 2025[202][208]. - The Company has expanded its operational footprint by opening three branch offices and acquiring two full-service title agencies in the past five years[208]. Environmental and Social Governance - The company may face increasing scrutiny regarding its environmental, social, and governance practices, which could impact its reputation and operational costs[170]. - Environmental liability risks are associated with lending activities, particularly when foreclosing on properties that may contain hazardous substances, potentially leading to significant remediation costs[147]. Shareholder Information - The Company’s common shares are traded on the NASDAQ Capital Market under the symbol "SBFG," with 6,493,526 shares outstanding as of December 31, 2024[191]. - A limited trading market for the company's common shares may lead to price volatility, affecting shareholders' ability to sell shares at desired prices[160]. - The market price of the company's common shares may fluctuate significantly due to changes in market sentiment and external economic factors[162].